# FX Transactions

#### Overview <a href="#overview" id="overview"></a>

In energy commodities trading, FX (foreign exchange) transactions are essential for managing exposure to currency fluctuations — especially when physical commodities are priced in USD or other foreign currencies, but your reporting currency is different. Molecule supports three types of FX transactions: FX Forwards, FX Swaps, and Non-Delivering Forwards.These instruments allow you to hedge currency exposure, trade FX directly, and manage foreign exchange risk.

#### Prerequisites <a href="#prerequisites" id="prerequisites"></a>

* FX transactions feature enabled on your account
* Appropriate trading permissions
* Understanding of FX market conventions
* Access to FX rate data (spot and forward rates)

#### Supported FX Transaction Types <a href="#supported_fx_transaction_types" id="supported_fx_transaction_types"></a>

<table data-header-hidden><thead><tr><th width="202.51953125"></th><th></th></tr></thead><tbody><tr><td><strong>Type</strong></td><td><strong>Description</strong></td></tr><tr><td><strong>FX Forwards</strong></td><td><ul><li><strong>Purpose</strong>: Lock in a future exchange rate</li><li><strong>Settlement</strong>: Exchange both currencies at maturity</li><li><strong>Use Case</strong>: Hedge known future currency exposure</li></ul></td></tr><tr><td><strong>FX Swaps</strong></td><td><ul><li><strong>Purpose</strong>: Temporarily exchange currencies</li><li><strong>Settlement</strong>: Exchange currencies at spot, reverse at maturity</li><li><strong>Use Case</strong>: Manage short-term liquidity or hedge timing differences</li></ul></td></tr><tr><td><strong>Non-Delivering Forwards</strong></td><td><ul><li><strong>Purpose</strong>: FX rate hedge without currency exchange</li><li><strong>Settlement</strong>: Cash settlement in one currency only</li><li><strong>Use Case</strong>: Hedge FX exposure without operational currency exchange</li></ul></td></tr></tbody></table>

#### Entering FX Transactions <a href="#entering_fx_transactions" id="entering_fx_transactions"></a>

**Access FX Trading**

1. Navigate to **Trading > FX Transactions**
2. Click **New FX Trade**
3. Select T**ransaction type** from the dropdown

**FX Trade Entry Form:**

<figure><img src="https://files.helpdocs.io/56bu62syz9/articles/ev2v2wk1p3/1753826357000/image.png" alt=""><figcaption></figcaption></figure>

<table data-header-hidden><thead><tr><th width="181.82421875"></th><th></th></tr></thead><tbody><tr><td><strong>Currency Pair Section</strong></td><td><ul><li><strong>Base Currency</strong>: First currency in pair (what you're buying/selling)</li><li><strong>Quote Currency</strong>: Second currency in pair (what you're paying with)</li><li><strong>Flip Button</strong>: Quickly reverse the currency pair (EUR/USD ↔ USD/EUR)</li><li><strong>Base/Quote Format</strong>: EUR/USD means EUR is base, USD is quote</li><li><strong>Buy:</strong> Long the base currency, short the quote currency</li><li><strong>Sell</strong>: Short the base currency, long the quote currency</li></ul></td></tr><tr><td><strong>Transaction Details</strong></td><td><ul><li><strong>Transaction Type</strong>: Forward, Swap, or Non-Delivering Forward</li><li><strong>Direction</strong>: Buy (long base currency) or Sell (short base currency)</li><li><strong>Notional</strong>: Trade size in base currency units</li><li><strong>Trade Date</strong>: When the transaction was executed</li></ul></td></tr><tr><td><strong>Rates Section</strong></td><td><ul><li><strong>Forward Rate</strong>: Exchange rate for settlement (required for all types)</li><li><strong>Spot Rate</strong>: Current exchange rate (required for swaps only)</li><li><strong>Fixed Rates:</strong> Enter specific exchange rate, for example: <code>1.0850</code></li><li><strong>Formula Rates:</strong> Use rate formulas, for example, <code>ECB 2025-08-25..2025-08-29</code><br>Rates determined from market data sources. Useful when final rate is set closer to maturity</li></ul></td></tr><tr><td><strong>Settlement Information</strong></td><td><ul><li><strong>Maturity Date</strong>: When currencies are exchanged</li><li><strong>Counterparty</strong>: Trading counterparty</li><li><strong>Tags</strong>: For trade categorization and reporting</li></ul></td></tr></tbody></table>

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#### Managing FX Positions <a href="#managing_fx_positions" id="managing_fx_positions"></a>

**FX Trades List**

* **View**: All FX transactions in dedicated trades list
* **Filtering**: By currency pair, counterparty, maturity date
* **Sorting**: By trade date, maturity, notional amount
* **Status**: Track trade lifecycle and settlement status

**Position Monitoring**

* **Currency Exposures**: View net positions by currency
* **Maturity Profile**: See when positions mature
* **P\&L Tracking**: Mark-to-market valuation updates
* **Risk Metrics**: Exposure amounts and concentration

#### FX Valuation and P\&L <a href="#fx_valuation_and_p_l" id="fx_valuation_and_p_l"></a>

**Valuation Method & Rate Sources**

FX transactions use forward rates (not commodity marks) for valuation: `P&L = (Current Forward Rate - Trade Forward Rate) × Notional × FX Rate`

Sources: **Current Forward Rate:** From your uploaded forward curves | **Trade Forward Rate**: Rate entered when trade was booked | **FX Rate**: Conversion rate to account base currency

<figure><img src="https://files.helpdocs.io/56bu62syz9/articles/ev2v2wk1p3/1753827503955/image.png" alt=""><figcaption></figcaption></figure>

#### Best Practices & Troubleshooting <a href="#best_practices_troubleshooting" id="best_practices_troubleshooting"></a>

**Best Practices**

**When entering trades**, it is essential to follow a consistent validation process to ensure accuracy and alignment with hedging strategies.

* Begin by verifying forward rates against reliable market data sources to confirm pricing integrity.
* Next, check that the buy or sell direction of each trade reflects the intended market position.
* Carefully validate maturity dates to ensure they align with the hedging timeline of underlying exposures.
* Additionally, document the purpose of each trade by applying appropriate tags to identify the associated hedging relationships, which supports auditability and reporting.

**From a risk management perspective**, maintain regular oversight of currency exposures to

* Ensure positions remain within defined risk parameters.
* Align the maturities of FX hedges with the tenors of the underlying exposures to avoid mismatches.
* To mitigate credit risk, diversify counterparties by distributing trades across multiple banking institutions.
* Finally, consistently track profit and loss by monitoring mark-to-market changes, helping to evaluate hedge effectiveness and financial impact over time.

#### Troubleshooting:

<table data-header-hidden><thead><tr><th width="267.328125"></th><th></th></tr></thead><tbody><tr><td><strong>Problem</strong></td><td><strong>Solution</strong></td></tr><tr><td><strong>Can't see FX transaction entry</strong></td><td>Verify FX transactions are enabled and you have trading permissions</td></tr><tr><td><strong>Rates not updating properly</strong></td><td>Check that forward curves are uploaded for your currency pairs</td></tr><tr><td><strong>P&#x26;L calculations seem incorrect</strong></td><td>Verify forward curve data and check base currency conversion</td></tr></tbody></table>